Sony’s credit rating heads toward junk pile

Just over a week ago, we reported that Sharp, one of Japan’s biggest electronics firms, may be set to go under. We also noted how other Japanese tech mega-corporations, including Panasonic and Sony, aren’t doing too well either. After Sharp posted its most recent loss, its financial rating fell to junk status, and the company is now seeking a government bailout. Panasonic was also hit with a near-junk rating by Fitch earlier this month, after it posted a loss 30 times larger than analysts had estimated.

"Without robust restructuring in the coming 12 to 18 months, Sony's non-financial services businesses will at best achieve roughly break even, and are also at risk of remaining unprofitable," the rating agency said in its report.

In its most recent earnings report (PDF), Sony posted a net loss of ¥15.5 billion ($195 million). Sony’s stock has plummeted over the last year, dropping an additional 36 percent beyond a 53 percent loss from 2011.

In addition, Moody’s noted that rise of smartphones meant a “cannibalization of demand” for low-end digital cameras and even handheld gaming consoles.

“At the same time, operating profit from Sony's digital imaging products and games businesses declined about 60 percent in [the first half of 2012] on a year-over-year basis,” Moody’s added. “The earnings from these products are now expected to decline more rapidly than expected as the growing use of smartphones increasingly cannibalizes the market for compact digital cameras and portable game consoles.”

To add insult to injury, Japan’s economy minister also suggested Friday that none of these companies would likely receive a government bailout.

"In this society of capitalism, I believe companies in general should rebuild themselves through their own efforts," Seiji Maehara told a press briefing in Tokyo.

It sounds more like the Japanese government doesn't have any money to give these corporations because of the massive amount of corruption within the government itself.

EDIT: Err why did I get down voted for stating the truth? And before anyone says anything, the amount of corruption in the US pales in comparison to the amount throughout the entire structure of the Japanese government. We put up huge stink when that FCC commissioner was going to take a job with the industry she was regulating, but this type of occurrence is an everyday affair in Japan.

Even the mightiest fall eventually. I wonder in 10 or 20 years if we'll be reading the same about Apple. I look back at yesteryear when "Walkman" and "Trinitron" were household words and no price was too high to pay for a Sony.

The big thing Apple has going for it though is its ecosystem. Compatibility with Apple devices is practically mandatory for many non-Apple electronics. They are deeply entrenched, something Sony never really achieved outside of game consoles.

Now, more than ever, I feel like we need some news on their next generation Playstation console.

Traditionally it seems like these things are usually sold at a loss in the beginning. How could Sony afford to do something like that? I could see two situations: One where the PS4 they'd planned on is no longer feasible; so if they show us those plans, it's a will-o-the-wisp. And another where they hastily change their plans in light of whatever new realities they think they're facing, and they show plans for a PS4 they *can* do, but people point and say "That looks slapdash and poorly thought out."

Sony is one schizophrenic company. One of its personalities is as a consumer electronics giant which created great products enabling its customers to copy media content as easily and perfectly as possible, e.g. a TV set which can copy the input signal as near as perfectly to images and sound. Sony's other personality is as a media company which wants to make it as hard as possible for customers to copy content in case doing this outside DRM control reduces market for said content. This is the company which deliberately shipped malware on audio CDs and tried to intimidate and sue George Hotz for showing Sony's other customers new things which were possible with Sony's previously excellent but now sabotaged products.

So it's not at all surpising Sony's business is crashing around their ears, more an inevitability. This company needs to split into 2 which can go their separate ways, where one part of the company isn't trying to sabotage the other.

I have disliked Sony for a long time. The way they treat their customers and users is appalling (Forcibly removing a selling-point feature from their console, restrictive DRM, carelessness with user data ad nauseam, etc.)

If Sony goes under, or as a result of some restructuring exits the console market, then here's hoping that Sega jumps back in to fill the void.

Sony is one schizophrenic company. One of its personalities is as a consumer electronics giant which created great products enabling its customers to copy media content as easily and perfectly as possible, e.g. a TV set which can copy the input signal as near as perfectly to images and sound. Sony's other personality is as a media company which wants to make it as hard as possible for customers to copy content in case doing this outside DRM control reduces market for said content. This is the company which deliberately shipped malware on audio CDs and tried to intimidate and sue George Hotz for showing Sony's other customers new things which were possible with Sony's previously excellent but now sabotaged products.

So it's not at all surpising Sony's business is crashing around their ears, more an inevitability. This company needs to split into 2 which can go their separate ways, where one part of the company isn't trying to sabotage the other.

I suspect if they split, the two halves will sabotage each other more, not less.

If Japan does indeed let these companies go under, it will be very interesting to compare to the results of the US government bailout of the auto manufacturers.

Ninhalem wrote:

It sounds more like the Japanese government doesn't have any money to give these corporations because of the massive amount of corruption within the government itself.

...Or the massive Japanese government debt... 208–230% of GDP, apparently! In this context, it's no wonder if Japan and the USA have chosen different courses of action. My concern (and perhaps a Japanese concern too) is that in the USA, the "bail-out" money has not all been wisely spent (a lot has gone to people and corporations that didn't deserve to be bailed out — when in some cases, executives should have been going to jail). My concern for the USA is that federal debt is heading up toward Japanese levels, where there won't be any room for economic manoeuvre. The Chinese would be able then (if they wanted) to knock down all their rivals globally as easily as blowing down a line of paper dominoes...

Now, more than ever, I feel like we need some news on their next generation Playstation console.

Traditionally it seems like these things are usually sold at a loss in the beginning. How could Sony afford to do something like that? I could see two situations: One where the PS4 they'd planned on is no longer feasible; so if they show us those plans, it's a will-o-the-wisp. And another where they hastily change their plans in light of whatever new realities they think they're facing, and they show plans for a PS4 they *can* do, but people point and say "That looks slapdash and poorly thought out."

Not to mention if they start talking about their next gen console now, people aren't going to buy PS3s for Christmas.

I have disliked Sony for a long time. The way they treat their customers and users is appalling (Forcibly removing a selling-point feature from their console, restrictive DRM, carelessness with user data ad nauseam, etc.)

If Sony goes under, or as a result of some restructuring exits the console market, then here's hoping that Sega jumps back in to fill the void.

You say a long time, but most of those negative points revolve around the PS3 era. 90s Sony was a different time, and even the PS2 was very consumer oriented. I wouldn't say that the 6 years the PS3 has been around is a "long time".

Also, Sega will never, ever jump back in. They no longer have the critical mass required to compete with Nintendo or Microsoft in the console wars. Any attempt would be a short nostalgia fueled rush, and then a hard crash later.

nintendo is still basically solid. to answer the question if any of the electronic japanese companies out of the 80's is still doing well.Sony asked for this years ago with their terrible customer service. One of the many reasons they kept on losing customers, also in general, just like HP they were badly managed. Personally I can't wait to see sony go under. My experience with their lack of customer service, when I bought a 2400 dollar laptop in 99 from them, led me to make sure that non of my extended family ever bought one of their products. Instead I pointed my family to competing businesses, like Apple, Asus, Acer, levono, Vizio, (to name a few in computer or music/video areas). I am sure that many other people have done so as well. hurray for the demise (I hope) of sony. they still owe me 2400 dollars. But I will be happy if it gets spent on a headstone for Sony.It is a shame that the other Japanese tech companies are also in trouble. I rather liked panasonic and sharp overall.

I was thinking about the Japanese economy being in the toilet and the debt, but again that in part leads back to the corruption within the government. They still wouldn't be in the toilet if they got their collective butts into gear and started taking responsibility instead of 1) blaming their blood type, and 2) apologizing all the time and shifting blame.

I have disliked Sony for a long time. The way they treat their customers and users is appalling (Forcibly removing a selling-point feature from their console, restrictive DRM, carelessness with user data ad nauseam, etc.)

I agree. I have refused to purchase a Sony product since I learned the DVD play I purchased refused to play audio CDs (not MP3's but actual audio CDs) which I burned on my computer. Not because the technology didn't permit it but because Sony made a decision to prohibit playback of self burned media.

How is this possible. All these companies are too big to fail. We need some Rothschilds to come bail them out fast before bond holders are subjected to losses. Dammit we can't have this, investors being subjected to risk and potential for loss. I thought only the little guy was able to suffer that.

There's a reason for bankruptcy. Its so something can die and rebuild, not put on life support, have its heart paddled back to life, and then its organs paid for by the masses, only to have it be given to a small group of people to benefit while everyone else takes risk.

Japan is goofy as a country sometimes, but this time, they have it right

Even the mightiest fall eventually. I wonder in 10 or 20 years if we'll be reading the same about Apple. I look back at yesteryear when "Walkman" and "Trinitron" were household words and no price was too high to pay for a Sony.

The big thing Apple has going for it though is its ecosystem. Compatibility with Apple devices is practically mandatory for many non-Apple electronics. They are deeply entrenched, something Sony never really achieved outside of game consoles.

Yep it's certainly possible. One thing that killed sony was it's culture. As a corporation it couldn't work together move in unison towards any goal. For the most part it's various groups remained competent - sony could always design a decent looking product but completely lacked vision as to what products it should be designing. And interoperability between their products was typically non-existant.

Steve left Apple as the polar opposite with it's top-down style and slim, careful product line. Also if you read his biography he thought constantly about how to set up Apple to last (he regarded the start-up culture by comparison with some disdain). He loved good products and realized that it takes a well-built company to produce them. So yes, Apple can absolutely fail, but I tend to think it would take more than a couple decades.

Anyway, sorry Sony, you had your chance and blew it over and over again.

about american debt and the chinese paper tiger. USA is in this debt issue by its own POLITICAL making, unlike japan where it was partially political paralysis but mostly economic/demographic issues that are not comparable to the USA, china is much more comparable to japan in this respect that either is to the USA.China and its severe internal structural fiscal and monetary issues are significantly understated. never mind its workforce desire for better conditions, or the corruption at all levels of society and government. I will be surprised if china is doing well in 5 years, EVEN if the USA and Europe recuperate I doubt China can sell us all enough stuff during the next 5 to 8 years to hide the weaknesses in its economy and government and demographic bomb. China NEEDS all the trillions it can get saved up (be it in the form of stashes of currency or debt bonds) to forestall and hopefully smooth out the demographic aging problems that it has.

...Or the massive Japanese government debt... 208–230% of GDP, apparently! In this context, it's no wonder if Japan and the USA have chosen different courses of action. My concern (and perhaps a Japanese concern too) is that in the USA, the "bail-out" money has not all been wisely spent (a lot has gone to people and corporations that didn't deserve to be bailed out — when in some cases, executives should have been going to jail). My concern for the USA is that federal debt is heading up toward Japanese levels, where there won't be any room for economic manoeuvre. The Chinese would be able then (if they wanted) to knock down all their rivals globally as easily as blowing down a line of paper dominoes...

It is a troubling thought. To add to that, what if the US Dollar loses its status as the world's reserve currency?

Sony is one schizophrenic company. One of its personalities is as a consumer electronics giant which created great products enabling its customers to copy media content as easily and perfectly as possible, e.g. a TV set which can copy the input signal as near as perfectly to images and sound. Sony's other personality is as a media company which wants to make it as hard as possible for customers to copy content in case doing this outside DRM control reduces market for said content. This is the company which deliberately shipped malware on audio CDs and tried to intimidate and sue George Hotz for showing Sony's other customers new things which were possible with Sony's previously excellent but now sabotaged products.

So it's not at all surpising Sony's business is crashing around their ears, more an inevitability. This company needs to split into 2 which can go their separate ways, where one part of the company isn't trying to sabotage the other.

Came here to write something like what you wrote above, couldn't have happened to a nicer company (well, two others come to mind...).

It's not only the lack of innovative products to disrupt or excite consumers, but also pacifist shareholders (who do not hold incompetent managers accountable for losses) and poor corporate governance (see Olympus scandal latest update: http://www.economist.com/news/business/ ... wing-board).

However, some other Japanese companies, such as Toyota, has managed to slowly turn it around in the last few years by focusing on making their products appealing to customers again. But in order to do so, the C-suite has to admit their short-comings and actually implement structural changes and new sound strategy.

Unfortunately Sony, Sharp and Panasonic are not Too Big To Fail, hence they won't be bailed out by the governments.

I have disliked Sony for a long time. The way they treat their customers and users is appalling (Forcibly removing a selling-point feature from their console, restrictive DRM, carelessness with user data ad nauseam, etc.)

If Sony goes under, or as a result of some restructuring exits the console market, then here's hoping that Sega jumps back in to fill the void.

You say a long time, but most of those negative points revolve around the PS3 era. 90s Sony was a different time, and even the PS2 was very consumer oriented. I wouldn't say that the 6 years the PS3 has been around is a "long time".

Also, Sega will never, ever jump back in. They no longer have the critical mass required to compete with Nintendo or Microsoft in the console wars. Any attempt would be a short nostalgia fueled rush, and then a hard crash later.

Yes, I gave relevant somewhat recent examples. There are more examples dating back further but these should be sufficient to show Sony's poor attitude towards it's customers.

Your comments about how Sega would fare jumping back into the console market are purely speculative, as are mine that follow; they could very well do just fine, especially offering features the core gaming market wants that beats M$ and Nintendo's offerings or finds a middle ground. They could even succeed on something as simple as marketing themselves as a 'Gamer's console' with Gaming being the primary focus and not having a UI that blows. Standardized controller and decent hardware makes more 3rd party titles come to the platform (Beating Nintendo), free online multiplayer while still selling digital content, and no ADS on MY damn console that I PAID for, would beat out M$ on those fronts. I'm not saying they would ruin M$ or big N (and I would certainly hope not), but there would definitely be room for a somewhat simple solution that grabs 1/3rd of the market with the first generation.

of course if they use good ol' cartridge media I'd be even happier. It's cheap enough these days and much more durable than discs

If Sony fails... and there is no PS4.... Can nintendo stand against Microsoft?

*awaits news of Apple building their own gaming console*

They alreadyhave. That's arguably part of the reason why Sony (and others) are having problems. Why buy a Vita which can only* play games, when you can buy an iPod Touch that can do whatever can be found on the App Store.

* I know the Vita has other capabilities, but it is advertised first and foremost as a gaming device.

To think that at one point, Sony was the clear main competitor to Apple to release 'sexy' and cutting edge consumer technology.

Recently it just seems Sony is trying to prove how much it hates its customers by having overbearing terms of service/banning class actions, releasing poorly thought out and overpriced products, and then making everything proprietary requiring more money to be spent.

As a product manager, I cant help but think Sony has made some incredibly stupid decisions month after month after month.

It sounds more like the Japanese government doesn't have any money to give these corporations because of the massive amount of corruption within the government itself.

Don't delude yourself - there's plenty of corruption to go around within the US Gov't too.

They should have at least let the first of the Detroit 3 fail and go under to serve as an example to the other 2. Much less any other Industry thinking that "oh well - if we head for bankruptcy - the Feds will bail us out like they did the auto and real estate industries and many tech firms - so no worries" -- which is exactly what the US Gov't established by doing that across the board. And what did it get us - companies like HP buying a corporate jet on that money and sending their execs to Hawaii for a 2 week 'retreat'.

"In this society of capitalism, I believe companies in general should rebuild themselves through their own efforts," Seiji Maehara told a press briefing in Tokyo.

Bravo!!

Why should the people have to bail out a company that myopically clings to its traditional profit centers without investing the effort and capital required to stay on top of the market, move into complimentary markets as they arise, or innovate new markets?

...Steve left Apple as the polar opposite with it's top-down style and slim, careful product line. Also if you read his biography he thought constantly about how to set up Apple to last... He loved good products and realized that it takes a well-built company to produce them...

Some people here are saying Panasonic was a good company. In many ways, they were; but they lost their brand credibility here in the UK by marketing "edge-to-edge" vacuum cleaners with exposed rollers that tended to maul children's fingers (and didn't warn anybody about the predictable dangers of the design). AS far as I understood it, their engineers didn't like the idea, but the management and marketing were all over it... No matter which way you look at it, it comes back to company culture! If Steve Jobs built an ethical and innovative company run by a well-motivated work-force, and if they stay true to those principles; then I hope Apple will last forever.

Sony has spent the past 15 years leveraging a well-deserved brand reputation for quality in one market (Professional A/V) to pass off completely mediocre goods and sub-par customer service in another (consumer electronics).

This company needs to split into 2 which can go their separate ways, where one part of the company isn't trying to sabotage the other.

I couldn't agree more. I still remember when I got mini-disk player. An excellent piece of hardware, far more capable and expandable then any MP3 player of day. Unfortunately it was saddled some awful piece of software to load it with files. You had to re-encode every file to something special in order to get it on the device.

Unfortunately I think if anything survives Sony's bankruptcy it will be the media devision, not the consumer product stuff.

If Japan does indeed let these companies go under, it will be very interesting to compare to the results of the US government bailout of the auto manufacturers.

Ninhalem wrote:

It sounds more like the Japanese government doesn't have any money to give these corporations because of the massive amount of corruption within the government itself.

...Or the massive Japanese government debt... 208–230% of GDP, apparently! In this context, it's no wonder if Japan and the USA have chosen different courses of action. My concern (and perhaps a Japanese concern too) is that in the USA, the "bail-out" money has not all been wisely spent (a lot has gone to people and corporations that didn't deserve to be bailed out — when in some cases, executives should have been going to jail). My concern for the USA is that federal debt is heading up toward Japanese levels, where there won't be any room for economic manoeuvre. The Chinese would be able then (if they wanted) to knock down all their rivals globally as easily as blowing down a line of paper dominoes...

There is a big difference between the Japanese government debts and the government debts of most occidental countries: the Japanese one is almost entirely held by Japanese institutions. This makes their debt problem an internal concern only, especially if they have the idea of defaulting it.One the other hand, one of the reason the Japanese government is unwilling to bail-out its former electronics glories is certainly the fact that they basically nationalized TepCo after the Fukushima disaster and they still have to more or less finance the rebuilding of the areas hit bit the earthquake and subsequent tsunami.